Thoughts about the economy:
When people save or pay off debts, they exert a downward pressure on prices. Resources that were being used to produce consumable goods are then made available to invest. Although the amount of money available for banks to lend does not change (the so-called paradox of thrift), the buying power of borrowed money increases. In other words, even though nominal investment does not change, real investment does change i.e. resources are directed away from consumption and toward investment, because the buying power of borrowed money increases.
One of the resources that is saved, and made available for investment, is labour. That is why an increase in savings creates temporary unemployment--labour is being freed up for entrepreneurs to reallocate.
Unfortunately, the scale of malinvestment has been so great, the intervention of government so unpredictable, that few entrepreneurs know what to invest in. This is not a confidence problem, but a knowledge problem. A wrong decision made confidently is still a wrong decision.
The U.S. economy has embarked upon an prolonged and unsustainable growth path, but never before has it wondered so far off-course or for so long. The wrong turns and missed signals cannot be easily retraced, and now few people know how to get the economy back on track. Entrepreneurs and investors are stumped: what does the future have in store for the U.S. economy? How much more will the government intervene? What will happen to the dollar? Etc.
The savings are not being swiftly reallocated. But there is little the government can do to help except get out of the way. They are primarily responsible for the problem, and would better serve the economy by taking measures to ensure they never do repeat the same error.
None of this should be happening. As the real estate bubble began inflating, interest rates should have begun rising to reflect the increasing scarcity of resources available to borrow (i.e. savings). The bubble would have popped much sooner as the high interest rates encouraged saving and discouraged borrowing. The economy would not have travelled so far along an unsustainable growth path, and investors would more easily be able to find a way back from the wilderness.
That is my assessment at the moment.